Comment by nodamage

Let's say hypothetically John Smith makes $500k/year as a software consultant. Instead of being paid directly he starts John Smith Inc. and routes his income through his corporation. He withdraws $100k/year in dividends to pay his living expenses which is paid under capital gains rates, the other $400k/year is invested in the stock market and grows tax-free forever inside the tax-sheltered corporation. The vast majority of John Smith's income will never be taxed as he only needs to withdraw enough in dividends every year to cover his living expenses.